Yampa Valley Electric Association

YAMPA VALLEY ELECTRIC ASSOCIATION, INC.
REGULAR MEETING OF THE BOARD OF DIRECTORS

The Board of Directors of Yampa Valley Electric Association, Inc. convened at 32 Tenth Street, Steamboat Springs, Colorado at 11:00 a.m. on May 18, 2007 for the regular meeting.

The Chairman reconvened the meeting of April 20, 2007, declared all business was concluded and upon motion being duly made and seconded, the April 20, 2007 meeting was adjourned.

The May 18, 2007 regular meeting was called to order by Pud Stetson, Chairman of the Board.

Upon calling the roll, it was reported that the following directors were present: Dean Brosious, Peggy Espy, Bill Haight, Sam Haslem, Pat McClelland, Scott McGill, Chuck Perry, Jim Simos and Pud Stetson, being all the directors.

A motion was made to approve the minutes of the previous meeting.

RESOLVED that the minutes of the previous meeting be approved.

Mr. Haslem reiterated his request from the previous month to have the CREA report given early in the meeting. The Chairman asked directors for their concurrence in the change to the agenda. With all directors in agreement, the agenda was revised to accommodate Mr. Haslem’s request.

Director comments were presented by members of the Board.

Directors reviewed the proposed revision to Board Policy 2-1, Public Attendance at and Participation in Board Meetings. The directors, Mr. Sharp and Mr. Covillo all participated in detailed discussion of the revisions. Directors made further suggestions for change to the language of the policy. Directors requested the latest revisions be made, the policy be sent to directors for their review in advance of the regular June board meeting and the matter be scheduled on the agenda of the June meeting.

Directors discussed YVEA donations. Mr. Covillo reviewed the Association’s practice and discussed how donations are budgeted, evaluated and granted. Board members expressed their opinions in the matter and concurred that the Association continue with its current practice regarding donations to organizations and activities in the service territory.

Mr. Covillo reviewed the list of items identified at the March board retreat for future group discussion. Directors discussed the option of accessing board policies on the internet or via the Association web page. There was Board consensus that the site need not be expanded for the purpose of director electronic access to board policies. Directors concurred that they would review their policy manuals on an annual basis to verify that they are current. It was agreed that this be done in the month that the Policy Committee holds their meeting.

The meeting was then adjourned at 12:05 p.m. for lunch break.

Upon reconvening at 12:45 p.m., the CREA report was moved to be the next agenda item.

Mr. Haslem gave the report of CREA. He discussed the legislative review presented at the meeting.

The next agenda item was the General Manager’s Report. Mr. Covillo asked Mr. Vaillancourt to present the safety report.

Mr. Vaillancourt stated that in the month of April, one employee reported a muscle pull that did not result in lost time. He stated one truck got a small dent on the fender which was less than $300 cost to repair. Mr. Vaillancourt noted the Association’s goal of achieving safety accreditation in the coming year. He reviewed the program and the steps necessary to be successful in becoming accredited. Mr. McGill asked who sponsors the program. Mr. Vaillancourt answered that NRECA is the sponsor but inspectors from CREA conduct the week-long inspection. Upon motion being duly made and seconded, the following resolution was unanimously adopted:

RESOLVED that the safety report be accepted as presented.

Mr. Covillo reported the status of the preparations for the 2007 Annual Meeting of Members. Directors received copies of the annual report. Mr. Covillo stated there is only one contest in Director District 7. Petitions were received from Susan Holland and Pat McClelland. He noted that the incumbent directors of Districts 4 and 5 are running unopposed and will therefore be deemed re-elected at the annual meeting. He stated there is no change to the agenda of the meeting and reported that lunch will be served to the members following the meeting in the Hayden High School cafeteria. Mr. Chappell reported the target date for mail of the annual report and director ballots.

Mr. Covillo reviewed power supply issues. He stated that Xcel and YVEA are still negotiating the matter of renewable energy as required by HB 1281. He reported receipt of a draft letter and reviewed his work with Holy Cross Energy on the matter. He reported Xcel will settle with Holy Cross Energy and offer YVEA the same settlement. He discussed the three options offered in the draft letter and said Xcel is clarifying the credits option for solar energy.

Mr. Covillo reported the June 1 rate change for the Association’s transmission service. He reviewed the formulary rate and stated the increase would be approximately 16%. Mr. Covillo said the new rate would translate to approximately $200,000 annual increase but did not see any need for change to the Association’s retail rates.

Directors reviewed a confidential term sheet for the Two Elks Power Plant. Mr. Covillo made a presentation on the matter and discussed the price quote, finance, rates and possible options for the Association. He reviewed the cost to proceed with investigation of the matter as driven by the cost of consultants. Mr. Covillo discussed the work necessary to pursue finance options with lenders. Mr. McGill inquired of the cost of consultants. Mr. Covillo stated that it could easily be $100,000.

Mr. Haslem departed the meeting.

Mr. Stetson asked directors whether to proceed with investigation of the offer by hiring the necessary consultants. Mr. Simos and Mr. McClelland indicated their interest in going forward and put the recommendation in the form of a motion. Mr. Haight asked Mr. Covillo to outline the steps he will take. Mr. Covillo reported he would contact PacifiCorp regarding their possible role in the displacement of power supply. He said he would speak to the lenders, CoBank and CFC, to discuss finance options. He said it would be necessary to sign a confidentiality agreement with Two Elks to continue. Mr. Covillo stated that positive response from the lenders would trigger a need to retain the proper consultants for review of the proposal.

During discussion, Tom Sharp reminded the Board that he has not provided legal advice or assistance on the Two Elk proposal or on prior proposals for alternative purchases of power supply resources. Tom advised the Board that he is not a specialist in legal aspects of power plant or power supply acquisitions or agreements, and recommended the Board continue to rely on Bob O’Neill, or other experienced attorneys, to provide legal counsel to the Board on these matters. No Board member disagreed with that recommendation.

The Board discussed Mr. Covillo’s response to Mr. Haight’s question. Directors returned copies of the confidential term sheets to the General Manager. With a motion on the table to approve the retention of consultants, the following resolution was unanimously adopted:

RESOLVED that the General Manager is authorized to spend the funds necessary to pursue the offer from Two Elk Generation Partners, Ltd. Partnership, specifically in the manner outlined and discussed in this meeting for the hire of consultants required to properly evaluate the Two Elk proposal.

Mr. Covillo discussed miscellaneous topics. He reported the status of the Pioneer Resources Gas project. He stated YVEA service is available for the customer and expects we’ll turn the substation on next week. Mr. Vaillancourt said we might expect the customer’s load to start coming on at the end of the month.

Mr. Covillo stated the 2007 capital credit retirement is due to be mailed June 1.

Mr. Covillo reported the numbers of compact fluorescent light bulbs being given and sold to customers. He stated the Association will continue the campaign and has announced it again in the annual report being mailed to members later in the month.

Mr. Covillo discussed the Downtown Steamboat Springs Building Improvement District. He asked Mr. Sharp to present his review of the matter. Mr. Sharp indicated the proponents appear to have petition signatures sufficient to place the matter to a vote. He stated the committee recommends YVEA be excluded from taxation but not the district. He said the petition to form the BID would include YVEA’s property. The committee’s proposed ordinance would exclude the YVEA property from taxation. The exclusion will need to be adopted by the City. He said the agreement does need YVEA’s approval. Directors discussed the matter and upon motion being duly made and seconded, the following resolution was unanimously adopted:

RESOLVED, that the Board of Directors of Yampa Valley Electric Association, Inc. supports the current proposal that YVEA property be excluded from the Downtown Steamboat Springs BID; and,

RESOLVED, that the Board approves the proposed Inclusion Agreement between the proponents of the Downtown Steamboat Springs BID and YVEA, for future inclusion of the YVEA property only when YVEA sells the property to a non-utility purchaser, and authorizes the President of the Association to execute such Agreement.

Mr. Simos presented the report of Paradigm Services. He reviewed the financial statements and Mr. Covillo made further comments about the financials. Mr. Covillo reported the Paradigm audit is still not complete. YVEA’s Paradigm directors reviewed certain of the discussion held at the last Paradigm Services board meeting.

Mr. Covillo presented the report of BTA. He stated the BTA Board would hold a conference call later in the month to discuss the disposition of the LMDS licenses.

Misters Stetson, Simos and Covillo reported their attendance at the NRECA Legislative Conference held in Washington, D.C.

Directors reviewed Advice Letter 42. Change was proposed to Sheet 29A to increase the rate of collection for the occupation tax imposed by the City of Craig from 1.796% to 1.802%. Mr. Covillo explained the charge. Upon motion being duly made and seconded, the following resolution was unanimously adopted:

RESOLVED that Advice Letter 42 be and is hereby approved.

Mr. Covillo and Mr. Miller reviewed the financial and statistical reports for the month of April. Upon motion being duly made and seconded, the following resolution was unanimously adopted:

RESOLVED that the financial and statistical reports be and are hereby accepted.

Mr. Haight presented the report of Western United. Mr. Covillo announced the Association’s alliance agreement with Western United.

The Chairman called for unfinished business. Mr. Stetson noted the agenda item of contractor complaint. He reviewed his discussion with one of the members. Mr. Stetson reported his direction to the member to present the complaint in writing for the Chairman’s consideration of how to proceed. He stated that the letter and the specific grievance were not received and that no one was in attendance at the meeting to make a presentation to the Board.

The Chairman called for new business. Mr. McGill asked whether the Board would discuss a General Manager succession plan or management catastrophe plan at some future meeting. Mr. Covillo reviewed previous discussion of the topic from Board retreats prior to Mr. McGill’s election to the Board.

There being no further business, the meeting was recessed until such time as may be necessary to reconvene for the purpose of acting on unfinished business as may properly come before the Board.

Secretary
APPROVED:

Chairman of the Board